I am pretty much sure that KMS does NOT allow to use fglrx.
I tried several times to make it work. So KMS is off.
Firmware linking is enabled, firmware itself is radeon-ucode-20110106
All the rest is mostly the same, except kernel being 32bit and xorg v1.8.2

I managed to solve the problem.
And it appeared that the guy from the thread in my first post gave exactly the right solution.

But!!!
I was unaware that ATI invented Windows-registry-like settings file!
It is located in /etc/ati/amdpcsdb and this is where fglrx gets its settings from.
So you can change anything in your xorg.conf in Device section, but it won't be used!
Can you imagine that?!!?

So what I did:
- Copied /etc/ati/amdpcsdb.default over /etc/ati/amdpcsdb.
That removed Capabilities and overlay settings previous driver version supported, but cause 11.2 just crash.
- Ran /opt/bin/aticonfig --initial=dual-head --tls=0
That initialized xorg.conf to support dual monitor configuration I have, and updated both /etc/ati/amdpcsdb and /etc/X11/xorg.conf with "UseFastTLS" option.

Now the summary, only aticonfig actually silently(!!!) updates /etc/ati/amdpcsdb.
So whenever you want to change something relating fglrx settings (like upgrade!!!), you need to use only aticonfig.

someone over there needs to be dickslapped. Yes, this is the technical term, "dickslapped". The OS has absolutely nothing to do with this issue; all that is relevant, kernel version, driver versions, versions of graphics libraries, end of story. They are being lazy.Then again, if they do not want to help you resolve a bug because they are being lazy, screw 'em. Someone on a "supported" distro will still come along later and submit this same problem, exposing this same bug, and instead of them fixing the issue in the beginning when you report it, they will fix it much later and look like fools - and people will go buy nvidia cards because they are tired of waiting on slow responses._________________Lost configuring your system?
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